(Adds background, context, refocuses on banks' capital needs,
By Jason Lange
ATLANTA, April 15 The U.S. Federal Reserve is
considering further steps to force big banks to hold more
capital, and sees a case for other stability-enhancing measures
for more shadowy areas of Wall Street as well, Fed Chair Janet
Yellen said on Tuesday.
The Fed has been pushing banks to strengthen their balance
sheets since the 2007-2009 financial crisis, and last week
joined other regulators in requiring the eight largest U.S.
banks to increase their capital levels by some $68 billion in
"There might be room for stronger capital and liquidity
standards for large banks than have been adopted so far," Yellen
said in a pre-recorded video for a financial markets conference
hosted by the Atlanta Federal Reserve Bank.
She cited a 2010 study by the Basel Committee, an
international standard-setting body, that suggested tighter
standards would provide economic benefits.
The United States is in the process of implementing new
international capital and liquidity standards known as Basel
III, which will be phased in between 2015 and early 2019. The
rules are meant to help banks weather short-term funding crises.
Yellen said the U.S. central bank's staff was "actively
considering" whether even more needed to be done to address
risks in the so-called short-term wholesale funding market,
which is a significant source of funding for firms.
Firms in that corner of the market were protagonists in the
financial crisis, when investors fled establishments such as
Lehman Brothers and even money market mutual funds previously
deemed super safe.
The internationally adopted Basel standards that will
require lenders to hold separate buffers of cash and bonds "do
not fully address the financial stability concerns associated
with short-term wholesale funding," Yellen said.
She said tougher capital and liquidity rules would likely
apply only to the largest and most complex banks, but that other
measures, such as rules on how heavily firms could rely on
borrowing in securities transactions, could extend market-wide.
(Reporting by Jason Lange in Atlanta; Additional reporting by
Jonathan Spicer in New York; Editing by Clive McKeef and James